Exco Technologies Limited

and thank you for standing by. Welcome to the EXCO Technologies Limited second quarter results 2025 conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Darren Kirk, Chief Executive Officer. Please go ahead.

Thank you, Lisa, and good morning to all participants. Welcome to Exco Technology's fiscal 2025 second quarter conference call. I'll begin with an overview of operations, followed by our CFO, Matthew Posno, who will review the financial details for the quarter. Afterwards, I'll address our outlook before we open the call for questions. Before we begin, I'd like to remind everyone of the cautionary notes included in yesterday's news release and on page two of the presentation we posted to our website. These notes are applicable to today's discussion. Firstly, I'm very pleased with our performance this quarter, which featured record consolidated revenues, record revenues for our cast and extrusion segment, and consolidated EBITDA excluding restructuring charges among the highest in EXCO's history. We achieved these results despite challenging market conditions, including sharply reduced automotive production volumes in both North America and Europe, as well as ongoing tariff uncertainties. Throughout the quarter, we continued investing in our future by enhancing operational efficiency, driving innovation and leveraging recent strategic investments to capitalize on favorable market opportunities. In our automotive solutions segment, the modest sales decline significantly outperformed broader reduction in vehicle production volumes. This resilience was helped by exceptionally strong U.S. SAR figures as consumers accelerated purchases ahead of impending U.S. tariffs. New program launches, favorable exchange rate movements, and the restocking of accessory inventories that had reduced in prior quarter also helped our results. These factors coupled with a favorable product mix helped maintain segment EBITDA margins around 12% despite increased pressure in Europe and restructuring charges, which largely reflect proactive headcount reductions as we further streamline operations and emphasize automation. In our casting and extrusion segment, We saw strong sales for new high-pressure die-cast molds, rebuilds, and additively printed inserts, although order intake for these products was softer. Demand for consumable die-cast components and extrusion-related products rebounded from the previous quarter to levels broadly consistent with the prior year. Capital equipment sales also remained relatively stable as our customers continued to focus on productivity and efficiency improvements, a core strength of our cast fuel operations. Margins in the casting extrusion segment were lower year over year despite significant improvements at recent greenfield facilities, primarily due to restructuring charges. These charges negatively impacted results this quarter, but have positioned us for immediate cost structure improvements moving forward. Additionally, we experienced higher cost and operational disruptions related to the outsourcing during the installation of new heat treatment equipment at our largest extrusion dye facility located in Michigan. We remain committed to achieving greater scale and efficiency from our recent capital investments and saw encouraging progress this quarter. Notably, Castool's facility in Mexico continued to ramp up effectively, our heat treatment operations performed exceptionally well, and our Halix operations in Europe delivered profitability improvements that outpaced local market conditions. Matthew will now provide an overview of the financials.

Thank you, Darren. Good morning, ladies and gentlemen. Consolidated sales for the second quarter ended March 31st, 2025 were $166.1 million compared to $163.8 million in the same quarter last year, an increase of $2.3 million or 1%. The impact of foreign exchange rate changes increased consolidated sales $8.8 million in the quarter. Consolidated net income in the second quarter was $6.4 million or basic and diluted earnings of $0.17 per share compared to $8.1 million or $0.21 per share the same quarter last year, a decrease of net income of $1.7 million, or 21%. Net income this quarter included $2 million, or 5% on an EPS basis, of after-tax restructuring charges compared to less than around 1% EPS the prior year. The consolidated effective income tax rate was 33.7% in the quarter compared to 22.8% in the prior year quarter. The change in income tax rate in the quarter was impacted by geographic distribution, foreign tax rate differentials and losses that cannot be affected for tax accounting purposes. The automotive solutions segment reported sales of $82.9 million in the second quarter, a decrease of 2.9 million or 3% from the prior year quarter. Foreign exchange rate changes increased segment sales in the quarter $4.8 million. Second quarter sales were modestly below the prior year level but increased 15% sequentially Results in the quarter were favorably impacted by strong seasonally adjusted annual rates in North America, reaching 17.7 million units in March, as well as inventory restocking of accessory products driven by the strong SAR performance. However, despite the favorable performance, the global automotive risk market continues to be negatively affected by global tariff uncertainty, recessionary risks, environmental regulatory changes that may affect future production, and reduced consumer confidence. Nonetheless, supportive factors include the potential for lower interest rates, continued resilience in vehicle sales, an aging vehicle fleet, and higher OEM incentives. The automotive solution segment reported pre-tax profit of $7.8 million in the second quarter, a decrease of half a million dollars in the prior year quarter. Second quarter segment pre-tax profit increased sequentially 65% over the first quarter. Variances in the period profitability were due to lower sales volume, product mix shifts, and rising labor costs in all jurisdictions. Labor costs in Mexico have been particularly challenging in recent years and are seeing added pressure in fiscal 2025 given the significant rise in wage levels. In reaction to these challenges, the company incurred incremental restructuring costs of half a million dollars in the quarter. These restructuring actions will help the segment deal with current production levels more efficiently and provide a strong base for future profitability when the market improves. The casting and extrusion segment reported sales of $83.2 million in the second quarter, an increase of 5.2 million or 7% from the same period last year. Foreign exchange rate movements increased segment sales by $4 million in the quarter. Demand for casting and extrusion products recovered in the second quarter as sales increased 17% from weak conditions in the first quarter, due primarily to December holiday shutdowns at our customers. Extrusion tooling sales were stable in the second quarter, reflecting the diverse end markets this group ultimately supports, which include building and construction activity, automotive, sustainable energy, transportation, recreational vehicles, and electrical components. In the die-cast market, which primarily serves the automotive industry, order flow for new molds and associated consumable tooling has declined as automotive manufacturers continue to put new product development and production on hold, in part due to the current political risks. That being said, sales for large molds were very strong in the quarter as a high number of dies were shipped. While overall quoting activity remains decent, sales of die cast products in the short term will be impacted as the automotive industry reacts to global tariffs, economic uncertainty, and lengthening vehicle refresh cycles. Demand for EXCO's additive 3D printed tooling continues a steady contribution as customers focus on greater efficiency with the size and complexity of die cast tooling continuing to increase with the rising adoption of gigapresses. Management is developing the benefits of its Castell Greenfield locations in Morocco and Mexico, which provide the opportunity to gain market share in Europe and Latin America through better proximity to local customers. The casting and extrusion segment recorded $4.5 million of pre-tax profit in the second quarter, a decrease of $1 million from the same quarter last year, and an increase of $800,000 from the first quarter fiscal 25. Pre-tax profit reduction is primarily due to incremental restructuring costs of $1.6 million incurred during the second quarter, mainly related to headcount reduction activity. Excluding the impact of the restructuring charges, segment pre-tax profits improved marginally. The underlying pre-tax profit improvement was due to program pricing improvements, favorable product mix, and efficiency initiatives across the segment, including the ongoing use of lean manufacturing and automation to improve productivity through standardization and waste elimination. In addition, volumes at Castile's heat treat operation continue to increase, providing savings and improved production quality while efficiency initiatives at Halex are progressing. Offsetting these cost improvements were ongoing losses at Castile's greenfield operations, albeit with good improvement demonstrated. We remain focused on standardizing manufacturing processes, enhancing engineering depth, and centralizing critical support functions across our various plants. These initiatives have reduced lead times, enhanced product quality, expanded product breadth, and increased capacity which will contribute to profit improvements. EXCO generated cash from operating activities of $8.7 million during the quarter and $3.1 million of free cash flow after $4.4 million in maintenance fixed asset expenditures. This free cash flow, together with the company's cash balances, was used to fund fixed assets for growth initiatives of $4.1 million $4 million of dividends, and $900,000 to repurchase shares under a normal course issuer bid. EXCO entered the quarter with $18 million in cash, $100 million in bank and long-term debt, and $51 million availability in its credit facility. EXCO's financial position remains strong. As such, the company's balance sheet and availability on the existing credit facility provides continued support for our strategic initiatives. Our strong financial position, combined with our free cash flow, creates a foundation for management to pursue high-value growth capital expenditures, dividends, and other opportunities that may arise. That concludes my comments. We can now transition back to Darren to discuss the company's outlook.